Australian home market’s first test of the year

The Australian property market will undergo its first major test tomorrow when 1,700 capital city homes go under the hammer on the first significant auction day of the year. CoreLogic economist Kaytlin Ezzy said it will be the second biggest start to February on record behind 2022 when 1,779homes went to auction. In the country’s two biggest auction markets, there will be 608 auctions held in Melbourne and 591 in Sydney.

Ms Ezzy said auction clearance rates weakened to below-average levels toward the end of last year and tomorrow’s event would “help set the pace for the pre-Easter selling season and provide a timely test of buyer demand”.

She added: “This week’s results could help indicate whether the weaker selling condition seen towards the end of last year has persisted into 2023 or if sentiment has lifted with earlier expectations of rate cuts following [this week’s] inflation update.”

Australia’s median home value moved higher for the twelfth consecutive month in January, up 0.4 percent. This follows an 0.3 percent uplift in both November and December. However, price performance is mixed across the capital cities, with Perth once again delivering outstanding growth at 1.6 percent in January. CoreLogic research director, Tim Lawless explained: “The western capital continues to see housing demand outweigh supply, helping to push values 16.7 percent higher over the past 12 months. Despite that, housing prices remain relatively affordable compared with most capital cities, with the median dwelling value sitting just under $677,000.”

Adelaide home values lifted 1.1 percent in January, Brisbane prices rose by 1 percent and Sydney values moved up 0.2 percent. Conversely, Hobart home values fell 0.7 percent, Canberra prices dipped 0.2 percent and Melbourne declined by 0.1 percent.

Mr Lawless noted that house prices across Australia continued to rise faster than apartments. The price gap is now at a new record high of 45.2 percent. House values across the capital cities lifted by 0.5 percent in January, equivalent to about $4,800 in value, while apartments lifted 0.1 percent, or about $900 in value. “Since the commencement of the upswing, capital city house values have surged 11 percent higher while unit values are up 6.9 percent,” Mr Lawless said. “It seems that most Australians are willing to pay a higher premium than ever for a detached home.”

Sales volumes remain elevated, with CoreLogic estimating 115,241 dwellings were sold over the three months ending January, which was 11.9 percent higher than the same time last year. “Despite ongoing cost of living pressures, high interest rates, low consumer sentiment and affordability constraints, homes are still selling, Mr Lawless said. “Housing demand has been buoyed by high migration, but also tight rental markets that have probably incentivised renters to transition towards home ownership if they can afford to do so.”